Safran (SAF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Safran (France)

Based on various researches at Oak Spring University , Safran is operating in a macro-environment that has been destablized by – increasing commodity prices, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, etc

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Introduction to SWOT Analysis of Safran

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Safran can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Safran, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Safran operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Safran can be done for the following purposes –
1. Strategic planning of Safran
2. Improving business portfolio management of Safran
3. Assessing feasibility of the new initiative in France
4. Making a Aerospace & Defense sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Safran

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Strengths of Safran | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Safran are -

Successful track record of launching new products

– Safran has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Safran has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Organizational Resilience of Safran

– The covid-19 pandemic has put organizational resilience at the centre of everthing Safran does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Superior customer experience

– The customer experience strategy of Safran in Aerospace & Defense industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Training and development

– Safran has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Ability to lead change in Aerospace & Defense

– Safran is one of the leading players in the Aerospace & Defense industry in France. Over the years it has not only transformed the business landscape in the Aerospace & Defense industry in France but also across the existing markets. The ability to lead change has enabled Safran in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Low bargaining power of suppliers

– Suppliers of Safran in the Capital Goods sector have low bargaining power. Safran has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Safran to manage not only supply disruptions but also source products at highly competitive prices.

High brand equity

– Safran has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Safran to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Operational resilience

– The operational resilience strategy of Safran comprises – understanding the underlying the factors in the Aerospace & Defense industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

Learning organization

- Safran is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Safran is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Safran emphasize – knowledge, initiative, and innovation.

Strong track record of project management in the Aerospace & Defense industry

– Safran is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Highly skilled collaborators

– Safran has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Aerospace & Defense industry. Secondly the value chain collaborators of Safran have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Aerospace & Defense industry

– Safran has clearly differentiated products in the market place. This has enabled Safran to fetch slight price premium compare to the competitors in the Aerospace & Defense industry. The sustainable margins have also helped Safran to invest into research and development (R&D) and innovation.

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Weaknesses of Safran | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Safran are -

High cash cycle compare to competitors

Safran has a high cash cycle compare to other players in the Aerospace & Defense industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Low market penetration in new markets

– Outside its home market of France, Safran needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Workers concerns about automation

– As automation is fast increasing in the Aerospace & Defense industry, Safran needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Lack of clear differentiation of Safran products

– To increase the profitability and margins on the products, Safran needs to provide more differentiated products than what it is currently offering in the marketplace.

No frontier risks strategy

– From the 10K / annual statement of Safran, it seems that company is thinking out the frontier risks that can impact Aerospace & Defense industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Ability to respond to the competition

– As the decision making is very deliberative at Safran, in the dynamic environment of Aerospace & Defense industry it has struggled to respond to the nimble upstart competition. Safran has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High dependence on Safran ‘s star products

– The top 2 products and services of Safran still accounts for major business revenue. This dependence on star products in Aerospace & Defense industry has resulted into insufficient focus on developing new products, even though Safran has relatively successful track record of launching new products.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Safran supply chain. Even after few cautionary changes, Safran is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Safran vulnerable to further global disruptions in South East Asia.

High bargaining power of channel partners in Aerospace & Defense industry

– because of the regulatory requirements in France, Safran is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Aerospace & Defense industry.

Products dominated business model

– Even though Safran has some of the most successful models in the Aerospace & Defense industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Safran should strive to include more intangible value offerings along with its core products and services.

Compensation and incentives

– The revenue per employee of Safran is just above the Aerospace & Defense industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

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Safran Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Safran are -

Leveraging digital technologies

– Safran can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Manufacturing automation

– Safran can use the latest technology developments to improve its manufacturing and designing process in Aerospace & Defense sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Safran can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Better consumer reach

– The expansion of the 5G network will help Safran to increase its market reach. Safran will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Building a culture of innovation

– managers at Safran can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Aerospace & Defense industry.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Safran in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Aerospace & Defense industry, and it will provide faster access to the consumers.

Using analytics as competitive advantage

– Safran has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Aerospace & Defense sector. This continuous investment in analytics has enabled Safran to build a competitive advantage using analytics. The analytics driven competitive advantage can help Safran to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Buying journey improvements

– Safran can improve the customer journey of consumers in the Aerospace & Defense industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Loyalty marketing

– Safran has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Safran to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Safran to hire the very best people irrespective of their geographical location.

Learning at scale

– Online learning technologies has now opened space for Safran to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Low interest rates

– Even though inflation is raising its head in most developed economies, Safran can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Aerospace & Defense industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Safran can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Safran can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

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Threats Safran External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Safran are -

Easy access to finance

– Easy access to finance in Aerospace & Defense industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Safran can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Environmental challenges

– Safran needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Safran can take advantage of this fund but it will also bring new competitors in the Aerospace & Defense industry.

Consumer confidence and its impact on Safran demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Aerospace & Defense industry and other sectors.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Aerospace & Defense industry are lowering. It can presents Safran with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Aerospace & Defense sector.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Safran needs to understand the core reasons impacting the Aerospace & Defense industry. This will help it in building a better workplace.

Capital market disruption

– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Safran.

High dependence on third party suppliers

– Safran high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Regulatory challenges

– Safran needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Aerospace & Defense industry regulations.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Safran can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Safran prominent markets.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Safran in Aerospace & Defense industry. The Aerospace & Defense industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Safran may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Aerospace & Defense sector.

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Weighted SWOT Analysis of Safran Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Safran needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Safran is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Safran is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Safran to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Safran needs to make to build a sustainable competitive advantage.

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